HONG KONG (Reuters) - Chinese artificial intelligence provider Megvii Inc, commonly known as Face++, is targeting to raise $500 million in a new funding round that pegs the current valuation of the firm at $3.5 billion, people with knowledge of the matter said.

FILE PHOTO: The logo of Face++ facial recognition software is seen at the Security China 2018 exhibition on public safety and security in Beijing, China, October 24, 2018. REUTERS/Thomas Peter/File Photo

Bank of China Group Investment Ltd, the state bank’s private equity (PE) arm, is looking to lead the fundraising with $200 million, two of the people told Reuters, declining to be named as the information is confidential. Terms of the fundraising have not been finalised, the people added.

Beijing-based Megvii declined to comment. Bank of China’s PE arm did not respond to a request for comment.

Megvii’s latest fundraising comes amid Beijing’s plans to build a ubiquitous closed-circuit television (CCTV) surveillance network and become an international leader in AI, a technology that is increasingly becoming key to various sectors.

Chinese and some foreign investors are pouring money into start-up firms that specialize in AI given Beijing’s emphasis on the technology. Investments in the sector surged to nearly $2 billion this year via 75 deals, more than four times the total value in the previous two years, according to Refinitiv data.

The technology has grabbed the attention of businesses from healthcare to financial services looking to use algorithms to comb through large troves of data to recognize patterns and solve problems. It is also set to spread to driverless cars and service robots in the future.

Megvii’s rival SenseTime Group Ltd raised $620 million in May at a valuation of over $4.5 billion, after a $600 million round in April led by Alibaba.

Founded in 2011 by Yin Qi and his two friends from Tsinghua University’s prestigious pilot computer science program, Megvii provides facial recognition and other AI technology to businesses and governments.